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Abernathy Daley Research Finds Over 80% of Companies Overpay Fees on Their Retirement Plans
Abstract: Abernathy Daley 401k Consultants (“Abernathy Daley”) believes well over 80% of all corporate retirement plans have not been benchmarked by independent 3rd parties over the last 3+ years. Consequently, more than 80% of corporate plan sponsors are overpaying on plan administration, and their employees are overpaying for the investment alternatives available within the corporate retirement plan. This assumption includes both 401(k) plans and 403(b) plans. Introduction Human resources (HR) departments are often tasked with understanding the corporate responsibility of offering employees a strong retirement plan while simultaneously keeping up with increasingly frequent and complex regulatory changes. It’s clear that HR professionals
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Majority of Plans Overpay. Cut Costs: Now is the Time to Benchmark
Over the course of our conversations during the last 12 months we have heard time and again the outrage regarding the fees and cumulative costs of 401k plan administration. Yes, we know it is a cost center. Yes, we understand that administering the 401k plan is often a thankless job. Yet being a cost center and being a thankless job, does not have to cost your company an arm and a leg to avoid the administrative tasks involved with providing a top-notch 401k plan which is crucial for your valuable employees in their planning for eventual retirement. Upon closer scrutiny, fees
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Secure 2.0 Act: Unlocking Tax Benefits for Individuals and Plan Sponsors
The Secure 2.0 Act, a landmark legislation aimed at enhancing retirement savings, offers a plethora of tax benefits for both individuals and plan sponsors. This article delves into the potential tax advantages and estimated savings for each group. Individuals 1. Increased Catch-Up Contributions The Secure 2.0 Act raises the catch-up contribution limit from $6,500 to $10,000 for individuals aged 50 and above. This increase allows individuals to contribute more to their retirement accounts, resulting in higher tax deductions. Estimated Savings: Up to $3,500 in additional tax deductions. 2. Tax Credit for Small Retirement Account Balances The Act introduces a tax credit
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Your Advisor’s Best Kept Secret: Corporate 401k Fees Have Been Shrinking For Years
We have closely monitored the trends in fee levels for corporate 401(k) plans over the past five years. With increasing scrutiny on retirement plan costs, there has been a notable shift towards greater transparency and cost-effectiveness, particularly for larger plans with over $10 million in assets. We have lowered our fees to remain below market, in relation to the trend levels. We recommend demanding a benchmark review if you find your company is paying fees in excess of what we outline below. Administrative Fees Administrative fees cover the day-to-day operations of a 401(k) plan, including recordkeeping, accounting, legal services, and participant
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Secure 2.0 Cheat Sheet: 7 Rule Changes You Need to Know
The SECURE 2.0 Act[1] introduced several major changes to 401(k) laws aimed at expanding coverage, increasing retirement savings, and simplifying retirement plan rules. Here are the seven key 401(k) provisions: 1. Higher Catch-Up Contribution Limits Starting in 2025, individuals aged 60-63 can make catch-up contributions to 401(k) plans up to the greater of $10,000 or 50% more than the regular catch-up amount for that year (indexed for inflation). This significantly increases the catch-up limits for older workers to boost their retirement savings in the final years before retirement. 2. Roth 401(k) Rule Changes Effective 2024, the requirement to take required minimum
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Roth 401k Plan 2024 Changes Provide Greater Flexibility
The SECURE 2.0 Act[1] has brought changes regarding Roth 401(k) rules. These changes align the treatment of Roth 401(k) accounts with Roth IRAs, providing greater flexibility and diversity of tax-advantaged growth opportunities for retirement savers. Elimination of Required Minimum Distributions (RMDs) for Roth 401(k)s One of the most notable changes under SECURE 2.0 is the elimination of the requirement to take RMDs from Roth 401(k) accounts, effective in 2024. Previously, participants were required to begin taking RMDs from their Roth 401(k) accounts upon reaching age 72 (or 70½ for those born before July 1, 1949), even though the distributions were tax-free.
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Secure 2.0 Series: Catch Up Contributions
Significant changes made to catch-up contributions under the SECURE 2.0 Act. These changes aim to boost retirement savings for workers closer to retirement and provide much-needed flexibility. Increased Catch-Up Contribution Limits Starting in 2025, the catch-up contribution limits for employees aged 60-63 in 401(k), 403(b), and governmental 457(b) plans will be increased to the greater of $10,000 or 50% more than the regular catch-up amount in effect for that year. For example, if the regular catch-up amount for 2025 is $7,500 (projected based on current limits), those aged 60-63 could contribute up to $11,250 ($7,500 + 50% of $7,500) as a
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Secure 2.0 Series: Matching Contributions for Student Loan Payments
New rules under the SECURE 2.0 Act allow you to potentially write off a portion of your student loan expenses through your employer’s 401(k) plan. Matching Contributions for Student Loan Payments Starting in 2024, employers can choose to amend their 401(k) plans to treat qualified student loan payments as elective deferrals for the purpose of receiving matching contributions. This means that instead of contributing to your 401(k) to get the employer match, you can use your student loan payments to qualify for the match. Here’s how it works: This provision can be incredibly beneficial for those struggling to save for retirement
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Overpaying for Your Company’s Plan? You Are Not Alone.
We understand the importance of cost-effective plan management. However, research indicates that many companies are overpaying for their 401k administration fees. Overpaying potentially erodes retirement savings for their employees, and certainly erodes corporate profitability, as most Corporate Sponsors pay 401k administration costs. By analyzing industry data and fee structures, we gain insights into the prevalence of overpayments and explore strategies to mitigate this issue. Prevalence of Overpayments A study by the Investment Company Institute found that the average all-in fee for 401k plans is around 1% of assets under management. However, a significant portion of plans, particularly smaller ones, pay substantially
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Is your Employee Education Meeting Requirements?
5 Steps to Ensuring the Answer is Yes Comprehensive Education Program Look for a provider that offers a robust, multi-channel education program covering all aspects of the 401(k) plan, including: 1. Enrollment process and eligibility requirements 2. Investment options and asset allocation strategies 3. Tax advantages and contribution limits 4. Retirement income planning and distribution options The education offerings should be delivered through various formats like in-person seminars, webinars, printed materials, videos, and online tools to cater to different learning styles. Dedicated Education Specialists Make sure the provider has a team of dedicated education specialists or retirement counselors who can conduct
